Overstreet v. Randolph
Overstreet v. Randolph, Wythe 47 (1789), involved John Holcomb Overstreet, who executed an obligation to Richard Randolph in exchange for a slave. Randolph assigned the obligation to William Griffin. Overstreet sued to have his obligation discharged due to fraud by Randolph.
The plaintiff, John Holcomb Overstreet, gave defendant Richard Randolph an obligation to pay £300 in exchange for a slave; Randolph then assigned the obligation to co-defendant William Griffin. Overstreet claimed that Randolph had dealed extremely unfairly with him, and asked to be relieved of his obligation.
The Court's Decision
The High Court of Chancery said that Griffin had paid valuable consideration to Randolph for the obligation and that Griffin had no idea that Randolph had dealt unfairly with Overstreet. Therefore, the court stated, under section 7 of Chapter 33 of the 1748 Virginia Acts of Assembly, Griffin had as much equity as Overstreet and a legal right to the obligation, and so it would not relieve Overstreet of his obligation. Overstreet raised four objections to the Court's decision, all of which the Court rejected:
Overstreet claimed that the Court gave the assignee, Griffin, a greater right than the assignor, Randolph, had. The Court rejected this objection, stating that Randolph only gave Griffin the same rights Randolph had. Randolph could have filed a claim to try to compel Overstreet's payment, but equity would have required the court to reject Randolph's claim due to Randolph's fraud. Since Griffin was unaware of any fraud and had committed none himself, though, equity would not bar Griffin's claim on those same rights. Between the two innocent men, the Court said the burden of loss falls on the one whose act led to that loss - in this case, Overstreet's creation of the obligation.
Overstreet also said that the Court assumed, but did not prove, that Griffin's equity was the same as Overstreet's. The Court responded that Overstreet's injury from Randolph's fraud and Griffin's injury from losing the consideration he paid Randolph are so dissimilar that the Court must assume they are equal until proven otherwise.
Overstreet said that the Court's decision would encourage fraudulent assignments and discourage would-be assignees from properly investigating the situation before buying. The Court replied that it is simply following the law, which it has no power to change, and that an obligor's "recent and diligent" action against a fraudulent obligee would put potential assignees in a buyer-beware situation, knowing that the obligation was in legal dispute.
Overstreet also objected that Chapter 33 allows discounts to be given before notice of assignment, so equity dictates that assignees should be liable to objections that could be made against the original owner. The Court stated that the discounts mentioned in Chapter 33 are setoffs created as reparations for fraud by the obligee as proven in trial; Overstreet's request for reparations against Griffin, who had committed no fraud, do not fall under the types of discounts Chapter 33 envisioned. Furthermore, the Court stated, the Virginia legislature presumably intended Chapter 33, Section 7 to place the assignee in the same situation as the indorsee of a bill of exchange, and the drawer of a bill of exchange does not have the same relief against an indorsee as they do against the payee. Finally, the Court concluded, the statute's language restricted its effect to the specific type of case described in the act.
- George Wythe, Decisions of Cases in Virginia by the High Court of Chancery with Remarks upon Decrees by the Court of Appeals, Reversing Some of Those Decisions, 2nd ed., ed. B.B. Minor (Richmond: J.W. Randolph, 1852), 47.
- 6 Hening's Statutes 87.